A college degree is worth about $300,000, the New York Fed says

Despite the rising cost of a college education coupled with the hardships of finding suitable employment following graduation, and not to mention the lingering debt, it turns out that acquiring a bachelor’s degree is still quite a good investment.

That’s the conclusion of a report (the first of four) by the Federal Reserve Bank of New York on the value of a college degree. In the article, authors Jaison Abel and Richard Deitz address the issues facing college graduates today—tuition, student debt, wages post college and the lack of jobs—by putting them into perspective stating that, “the value of a bachelor’s degree for the average graduate has held near its all-time high of about $300,000 for more than a decade.”

The New York Fed goes on to do the math revealing the benefit to a college degree being the college wage premium, or the extra money you can expect having a bachelor’s degree. The college wage premium is estimated as the average wage of college graduates compared with that of people with only a high school diploma, this is then summed up over a working life of more than forty years.

The most recent estimate of that gap between a college and high-school diploma, for full-time workers aged 25 and over, was 78%, according to separate data from the Bureau of Labor Statistics.

In an attempt to pin a dollar figure value to a college degree, the New York Fed looks at the costs and benefits to going to college over time. The report states there is a negative cash flow during the first four years, followed by a positive cash flow acquired during one’s working career, also known as the college wage premium. Of course money earned in the future is worth less than that in hand today, so they take the time value of money into account, discounting future earnings at a standard rate of 5%.

The results, which reach back as far as 1970, found that the net present value has grown since the 1970s, nearly tripling from the early 1980s to the 1990s where it’s stayed fairly consistent around $300,000.

The report went on to assess the value of a bachelor’s degree by seeing how long it takes to earn back the money spent on average. It found that the time it takes to break even on the investment of a college degree has fallen over time and now sits somewhere around 10 years.

It’s important to note, however, that these numbers are mere averages and cannot be attributed to everyone’s unique situation. But generally, in the long run, a college education is an investment that pays off.